Hatch: Democrats' Latest Tax Proposal a Joke
For Immediate Release
July 19, 2012
In Speech, Utah Senator Says, "We should be pursuing laws
that will help, not harm, businesses and middle class
taxpayers. And, the bill we are discussing on the floor
today is not going to help."
WASHINGTON - In a speech on the Senate floor today, U.S.
Senator Orrin Hatch (R-Utah), Ranking Member of the Senate
Finance Committee, criticized Senate Democrats' legislation
(S. 3364) for its lack of seriousness and said a better use
of time would be for Congress to stop the massive tax hikes
that will hit every taxpaying American at the end of the
year if Congress doesn't act.
"As sound bites go, the President's reelection campaign and
the Senate Democratic leadership have apparently decided
that they can make some political hay with this
proposal. But as substantive tax policy goes, this
proposal is a joke," said Hatch. "We should be pursuing
laws that will help, not harm, businesses and middle class
taxpayers. And, the bill we are discussing on the floor
today is not going to help."
Below are Hatch's full remarks delivered on the Senate
floor this afternoon:
Mr. President, today we are debating a bill called
the Bring Jobs Home Act. We live in serious
times. We have a debt fast approaching $16 trillion,
millions remain out of work, and economic and job growth
have slowed to a crawl.
Times like these demand serious economic answers. So it is
important that we all understand the utter lack of
seriousness of this proposal. The only things serious about
the Bring Jobs Home Act are its flaws.
The Bring Jobs Home Act would deny the deduction for
ordinary and necessary business expenses to the extent that
such expenses were incurred for outsourcing. That is,
to the extent an employer incurred costs in relocating a
business unit from the United States to outside the United
States, the employer would be disallowed a deduction for
any of the business expenses associated with such
The Bring Jobs Home Act would also create a new tax credit
for insourcing. That is, if a company relocated a
business unit from outside the United States to inside the
United States, the business would be allowed a tax credit
equal to 20 percent of the costs associated with such
On the surface, this proposal may sound reasonable. As
sound bites go, the President's reelection campaign and the
Senate Democratic leadership have apparently decided that
they can make some political hay with this proposal.
But as substantive tax policy goes, this proposal is a
First of all, the amount of money involved is
trifling. According to the non-partisan Joint
Committee on Taxation, this bill's deduction disallowance
provision will only raise about $14 million per year.
That's 14 million, not billion.
Let's put that in perspective. This bill is supposedly a
critical tax incentive to create jobs here in the United
States. Yet according to the JCT, it will only raise about
$14 million per year. Meanwhile, President Obama's campaign
has now spent $24 million on ads attacking outsourcing.
The American people want us to address our fiscal situation
and to create the conditions for robust economic and job
growth. And how are the President and Senate Democrats
spending their time?
Advancing a proposal that raises less money in one year
than the amount the President's campaign has spent
attacking Republicans on this topic on television. If
Democrats meant this as a serious revenue raiser for the
government, we would all be better off if the Obama
campaign had simply sent its $24 million to the Treasury
Department for disbursement to insourcers rather than spent
it on ads attacking American global businesses.
Simply put, this bill is misleading. Its supporters
would have you believe that under current law there is some
special deduction that exists for moving jobs outside of
the United States. That is simply false.
Rather, there has always been a deduction allowed for a
business's ordinary and necessary expenses - and expenses
associated with moving have always been regarded as
deductible business expenses. So allowing a deduction
for these expenses is not the special thing.
It is the rule. Disallowing this deduction would be the
exception, an extraordinary deviation from current tax
Yesterday, I heard my friends from the other side say we
need to end a tax deduction for jobs that a business sends
overseas. I have a letter from the Joint Committee on
Taxation, addressed to the bill's authors, that
includes an analysis of their bill and a score.
I ask unanimous consent to enter a copy of the letter in
the record. Paragraph two of the letter says and I quote:
Under present law, there are no specific tax credits or
disallowances of deductions solely for locating jobs in the
United States or overseas. Deductions generally are
allowed for all ordinary and necessary expenses paid or
incurred by the taxpayer during the taxable year in
carrying on any trade or business, which includes the
relocation of business units.
Now, perhaps my friends on the other side take issue with a
description of tax policy from Congress' non-partisan
official scorekeeper. Well, if they do, I invite them, or
the President for that matter, to show me the provision of
the Internal Revenue Code, which contains a deduction for
shipping jobs overseas.
Maybe Joint Tax and I are wrong, so I will keep the tax
code right at my desk, and if one of my friends wants to
leaf through the code and show me the section that provides
a deduction for shipping jobs overseas, I will stand
This administration is in the habit of pointing fingers
every which way, blaming everyone but themselves for our
weak economy and pathetic job growth. Just the other day,
the Treasury Secretary blamed Europe and rising oil prices
for our economic slowdown.
Yet he did not discuss the pall of uncertainty that
Democratic politicians - including his boss - are putting
over the economy with their refusal to extend the 2001 and
2003 tax relief unless they get their way on tax increases
for small businesses.
According to an analysis by the American Action Forum, the
fiscal cliff facing American taxpayers is now twice the
size of total GDP growth this year. If we drive over
the fiscal cliff, as the President and Senate Democratic
leadership are now threatening, the likelihood that small
business will hire will decrease by 18 percent, and the
effective marginal tax rate for many workers and small
businesses will go over 50 percent.
At least in part - and I would say in significant part - it
is the complete failure to provide certainty and pro-growth
tax policies to America's families and businesses that is
dragging our economy down.
And proposals such as the one before the Senate today are
not helping either. They increase uncertainty for the
businesses that will grow our economy and hire new
workers. It is another example of the Obama
administration's Washington-knows-best philosophy.
Disallowing the business expense deduction means that
income will now be measured less accurately. Gross
receipts minus business expenses equals income.
That's what both accountants and economists tell us.
But even though economists, accountants, and businesses all
measure income one way, Washington will now measure it
another way. Not only is this bad for business, but by
disallowing deductions for certain business expenses, this
proposal would measure income less accurately. And
when the government's main source of revenue is the income
tax, it is rather important to measure income accurately!
Ultimately, we know that this bill is devoid of serious
content because it is the product of political, not
economic, necessity. This bill is a sound bite - not
sound tax policy. There really aren't a lot of dots to
Really, the genesis of this bill's prioritization can be
traced in a straight line from 1600 Pennsylvania Avenue to
the President's reelection headquarters in Chicago. This
bill is called the Bring Jobs Home Act, but its Democratic
proponents have not presented any evidence of the number of
jobs, if any, that will return to America if the proposal
becomes law. During comments in support of the bill
the sponsor referred to a chart that said, and I quote,
[i]n the last decade, 2.4 million jobs were shipped
But the sponsor tellingly did not say that the bill will
bring 2.4 million jobs back to America. The
proponents of this bill have not even told us that jobs
will return to America if this bill becomes law, much less
how many. The answer is probably none, but that
is exactly the sort of question we would have explored had
this bill been produced by the Senate Finance Committee
rather than by some campaign consultant in
It is disappointing that even though the sponsor of this
bill is a member of the Senate Finance Committee, the
bill's sponsor chose to bypass that Committee. This
bill has come straight to the Senate floor without being
vetted by the Committee. Her colleagues on the
Committee would likely have some valuable feedback for
her. Both staffs on the Committee would likely have
valuable expertise that they could bring to bear on this
proposal. That is why I anticipate moving to commit
this bill to the Finance Committee.
And how does this bill fit in with tax reform? Many
on the other side say they want tax reform. I think
it is fair to say that there is a consensus that tax reform
means getting rid of tax expenditures so as to decrease tax
rates. The mantra is: Broaden the base, and
lower the rates. But this proposal would create new
tax expenditures. It would narrow the base.
Another major goal of tax reform is simplification.
But this proposal would make the tax laws even more
complicated. This proposal is the antithesis of true
Rather than coming up with more sticks to punish American
businesses that compete globally - as this proposal does -
we should be coming up with more carrots to encourage
American businesses, as well as foreign businesses, to make
America a more attractive place to expand, hire, and
invest. And of course, the best way to do that,
consistent with free-market principles, would be to lower
the corporate tax rate. But by creating new tax
expenditures, as this Act would do, it becomes all the more
difficult to lower the corporate tax rate.
If we really want businesses to locate and hire in the
U.S., then we need to do what we can to make sure they are
glad they incorporated in the U.S., and that their
headquarters are in the U.S. As it stands right now,
because of our worldwide tax regime, many global
corporations have their parent company in the U.S. as a
matter of historical accident.
If they had they to do it all over again, they very well
might decide to incorporate elsewhere in the world.
The way to address that, the way to make sure that the US
is the place global businesses want to incorporate is to
transition our current worldwide system of taxation to a
territorial tax system.
A territorial tax system would only tax businesses on the
profits they make in the U.S. This way, businesses
would not be discouraged from incorporating in the
U.S. Now, if a business incorporates in the U.S., all
of its worldwide profits are subject to U.S. tax.
It is certainly true that a territorial tax regime must be
done right, and that the devil is in the details. But
it is clear that territorial tax regime proposals could
lead to greater investment in the U.S., and more
headquarters jobs in the U.S. A territorial tax
regime would put American businesses in a more competitive
position when competing internationally. A
territorial tax system would make us more consistent with
major developed countries.
So it is amazing that President Obama has decided to
demagogue this issue as well, undermining the future job
prospects of millions of Americans for years to come, in
order to secure his own job for another four years.
Not content to grossly misrepresent the issue of
outsourcing, he is now doing the same with territorial
taxation. For a person who claimed last week that he just
cares so darn much about policy, he has an odd way of
showing it when he campaigns.
In the 2008 election, he fundamentally misled the American
people about key aspects of the health care proposal put
forward by my friend and colleague from Arizona, Senator
McCain. In doing so, he kicked the legs out from a
reasonable and growing consensus about how best to reform
the nation's health care system. And he did so only
for his own political gain.
His selfish attacks on a territorial tax system have a
similar flavor, and they promise to make tax reform much
more difficult in the future. It is hard to see how this
President can lead the country on tax reform.
He attacks territorial tax regimes. With a $4.5
trillion tax increase looming at the end of the year -
essentially freezing job creation and economic growth - his
allies in the Senate are debating this effectively useless
bill on outsourcing.
His administration called for the so-called Buffett tax,
essentially creating a new Alternative Minimum Tax that
would provide trivial revenues and tax capital gains at
higher rates than even President Carter wanted.
After waiting years for a corporate tax reform proposal,
this past February President Obama's Administration put out
a series of bullet points - their so-called Framework for
Corporate Tax Reform. All fluff, and no
Tax reform is critical if we want our economy to grow, and
if we are going to get out of our current jobs deficit. But
given this mediocre track record, I just do not think that
the President can be relied upon to lead the nation on this
Not in 2012. And not in a second term either. To the extent
that the President's tax agenda is not attributable to
politics, it can be blamed on his odd view of our economy
and the businesses that grow it.
I think it is fair to say that the President's worldview is
fundamentally out-of-step with that of ordinary American
taxpayers. Just the other day, while campaigning in
Virginia, the President laid out his economic vision.
Channeling the economic know-how of Harvard Law's faculty
lounge, he told the crowd, [i]f you've got a business -
you didn't build that. Somebody else made that
As Charles Krauthammer put it, spoken by a man who never
created or ran so much as a candy store. The President made
clear for all to see just what he thinks of all the
hard-working, risk-taking entrepreneurs who sacrifice daily
to build their businesses.
His perception is that the hard work and sacrifice of these
business owners and their families has nothing to do with
their success. Any success they have is owing to good luck
and big government. My guess is that not only American
business owners - but most Americans - disagree
fundamentally with this assessment.
The President clearly does not understand, or deliberately
ignores, economic incentives and the way that they lead to
business growth and job creation. This is certainly on
display in the policy that will forever define this
President - Obamacare.
Good intentions are not enough, and Obamcare's Small
Business Tax Credit is a case in point. This credit
was designed to encourage small employers to offer health
insurance. The promise was that over 4 million
employers would claim $2 billion in tax credits to help pay
for health insurance.
The reality? Only 309,000 taxpayers claimed the
credit, for a total of less than $416 million. Why
was the credit such a failure at achieving its
well-intentioned goal? Well, a picture is worth a thousand
words so please look at this chart. Can you imagine what a
business owner must think when they encounter an
administrative nightmare like this.
The Obamacare tax credit for small business gives red tape
a bad name. Talk about a bureaucratic straight
jacket. No wonder the business community has failed
to embrace Obamacare.
Mr. President, this issue of Obamacare's manipulation of
the tax code and its historic tax increases are deserving
of extended remarks. For now let me just say
that we should be pursuing laws that will help, not harm,
businesses and middle class taxpayers. The bill we are
discussing on the floor today, like Obamacare, is not going
to help. I yield the floor.